1099-NEC filing requirements: Contractor payment reporting guide for 2026

Published 16 December 2025

Table of contents

• What is Form 1099-NEC and who needs to use it?
• The $600 threshold and how to apply it
• 1099-NEC vs 1099-MISC: Key differences
• 2025/2026 filing deadlines for 1099-NECs and 1099-MSIC forms
• How to complete Form 1099-NEC
• Filing methods: paper vs electronic submission
• Avoid common 1099-NEC mistakes and penalties
• Track contractor payments with Xero
• FAQs on 1099-NEC filing requirements

Key takeaways

• Businesses must file Form 1099-NEC for any independent contractor or freelancer paid $600 or more during the tax year.
• The 1099-NEC deadline for 2026 is February 2. This deadline is firm – there are no extensions.
• Always collect a completed W-9 from contractors before paying them to ensure you have correct taxpayer identification numbers and to figure out if you need to withhold taxes from their payments.

What is Form 1099-NEC and who needs to use it?

Form 1099-NEC is a tax form that businesses must give to their independent contractors (freelancers) and anyone else they pay $600 or more for services they've provided to the business.

For example:

• if you're a general contractor and you hire an electrician as a subcontractor, you must give them a 1099-NEC that reports their earnings
• you run an advertising firm and you work with freelance graphic designers, writers, and photographers – you must give them 1099-NECs at the end of the year

The rule doesn't just apply to freelancers – it applies to anyone who provides services to your business, even if their services aren't related to your core operations. For instance, if you hire a landscaper, a repair company, or an accountant, you issue them a 1099-NEC to report their payments, unless:

• you pay with a credit card or through a third-party payment processing company, such as PayPal
• they're a corporation you pay them less than $600

Attorneys and healthcare providers that provide services to your business are not exempt, even if they’re a corporation. You must issue them 1099-NECs if you pay for their services.

Only businesses need to generate 1099-NECs. If you pay someone to provide services to you, as an individual, you don’t need to file this form.

The $600 threshold and how to apply it

As of 2025, the threshold for 1099-NEC forms is $600. If you pay an individual or a company $600 or more total throughout the year, you must provide them with a 1099-NEC, and send a copy to the IRS.

Track payments over the calendar year

You must track and report the payments over a calendar year – even if your business uses a fiscal year that differs from the calendar year. For instance, if your corporation uses a fiscal year that runs from June 1 to May 31, you should still track and report your contractor payments over the calendar year (January 1 to December 31).

1099-NEC vs 1099-MISC: Key differences

Form 1099-NECs are specifically for non-employee compensation – again, that includes freelancers or any individuals or businesses that provide services to your business. However, if you make any of the following payments, you should generate a 1099-MISC instead:

• rent
• prizes and awards
• medical and healthcare payments
• crop insurance proceeds
• settlements paid to attorneys – but you should still report payments to attorneys for services on Form 1099-NEC

1099-Misc forms have the same filing deadlines, the same late payments, and the same rules about withholding taxes as the 1099-NEC forms – the only difference is the type of payment.

2025/2026 filing deadlines for 1099-NECs and 1099-MSIC forms

For the 2025 tax year, all 1099-NECs and 1099-MSICs are due February 2, 2026. This deadline is earlier than for most other tax forms, and is firm – the IRS will not extend it, so make sure you file on time!

You must provide the form to both the payee and the IRS by this date – the technical requirement is that you must e-file or postmark the forms by this date, or they are considered late – check your state's requirements to see if you need to provide a copy to your state department of revenue.

The deadline is normally January 31, but because that date falls on a weekend in 2026, the deadline moves to the next business day.

How to complete Form 1099-NEC

Filling out this form is pretty straightforward. You need to include:

• your business's name, address, and phone number in the payer's box on the top left of the form
• your tax ID number, that's your business's EIN, or your personal tax ID number if you don't have an EIN
• the recipient's tax ID number – that may be an individual tax ID number or a business EIN, depending on which type of entity you paid
• the recipient's name and address
• the total amount of non-employee compensation you paid during the year (note this in box 1)
• tax withheld – if you withheld tax (which is rare), note the federal tax in box 4 and state tax in box 5 Also, put your state ID number in box 6 and state income in box 7

In most cases, when completing this form,To meet the 1099 filing requirements, you just need to include your info, the recipient's info, and the total payments in box 1.

Filing methods: paper vs electronic submission

You must e-file if you have more than 10 1099-NEC forms. Otherwise, you can e-file or mail in the forms.

You can e-file directly with the IRS using their Information Returns Intake System (IRIS) system, but it can be a little complicated and time consuming. Here's more information about e-filing information returns with the IRS.

You can also use a service that facilitates this process for you – like Gusto, which can e-file 1099-NEC forms for you. It syncs perfectly with Xero, too, so you can manage your tax filing and financial admin together in one place.

If you mail the forms, get a PDF of the 1099-NEC from the IRS's website. You can then use Copy 1 or 2 to send to the payee and your state, if applicable. However, you cannot print this PDF and send Copy A to the IRS – instead, you need to contact the IRS and have them mail you a copy of this form.

The IRS's guide to the 1099-NEC forms has a link to a PDF version of this form.

Avoid common 1099-NEC mistakes and penalties

To protect yourself and avoid penalties, keep these tips in mind.

• Make sure you're classifying contractors and employees correctly – you face significant back taxes, penalties, and even criminal charges for misclassifying employees as contractors.
• Get a W-9 from the contractor before paying the contractor – W-9s provide the info you need to complete the 1099-NEC. They also verify that the contractor is able to receive payments without you being required to withhold any tax. Here’s more about W-9s vs 1099s and how they complement each other.
• You need to withhold taxes if the contractor gives you an incorrect taxpayer ID number, the contractor’s W-9 shows they're subject to backup withholding tax, or you receive a notice from the IRS.
• You could be liable for the tax if you don't withhold taxes as required.
• File on time – don't miss that February deadline, or you'll upset contractors and incur big penalties from the IRS.

With 1099 contractors, you never have to deal with payroll tax the way you do with W2 employees. If the payments are subject to backup withholding tax, you just withhold federal income tax at a flat rate of 24%. Then at the end of the year, you file Form 945 (Annual Return of Withheld Federal Income Tax) or Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons).

For more about the differences between contractors and employees, check out this IRS definition of independent contractors.

Track contractor payments with Xero

Xero makes it easy to track contractor payments. You can provide contractors with digital W-9s, store their W-9s in your Xero account, track all their payments, and create reports showing their payments. Xero also syncs with apps that let you generate and e-file 1099-NEC forms.

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FAQs on 1099-NEC filing requirements

Take a look at these FAQs to learn more about 1099 filing requirements.

Do I need to file 1099-NEC for payments under $600?

No, you only need to file 1099-NEC forms if you pay a contractor $600 or more. As of 2026, you don't have to file if you pay them less than $2000.

What if I paid a contractor exactly $600?

If you pay a contractor exactly $600, you issue them a 1099-NEC form. Remember that this threshold only applies until the end of 2025 – for 2026, it increases to $2000.

Do I need to issue 1099-NECs to LLCs?

It depends. If the LLC is taxed as an S-corp, you don't have to issue a 1099 unless the company is a law firm or a medical/healthcare provider. If the LLC is not taxed as an S-corp, you should file Form 1099-NEC if you pay it $600 or more (as of 2025). If you pay the LLC with a credit card or through a third-party payment processing service, you don't need to issue a 1099.

What happens if I miss the January 31 deadline?

If you miss the deadline for filing 2025 1099-NEC forms, you could be penalized. The penalty is $60 per form if you're up to 30 days late. If you're 31 or more days late but file before August 1, 2026, the penalty is $130 per form. After that, it's $340 per form. If you intentionally disregard the law, the penalty is $680.

Can I file 1099-NEC forms myself, or do I need an accountant?

You can file 1099-NEC forms on your own – especially if you use accounting software like Xero to help you prep the forms and e-file. But if you don't feel comfortable doing it on your own, reach out to an accountant.

What if a contractor gives me incorrect W-9 information?

Then, you must withhold federal income tax from their payments – and potentially state income tax, depending on the rules in your state. To be on the safe side, get the correct information before making payments.

Do I need to file 1099-NEC for virtual assistants overseas?

No – you don't need to file a 1099 for a foreign contractor, unless that person provides work in the United States or is a US citizen living abroad.